[Congressional Record Volume 167, Number 87 (Wednesday, May 19, 2021)]
[Senate]
[Pages S3137-S3138]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  SA 1618. Mr. TILLIS submitted an amendment intended to be proposed by 
him to the bill S. 1260, to establish a new Directorate for Technology 
and Innovation in the National Science Foundation, to establish a 
regional technology hub program, to require a strategy and report on 
economic security, science, research, innovation, manufacturing, and 
job creation, to establish a critical supply chain resiliency program, 
and for other purposes; which was ordered to lie on the table; as 
follows:

       At the appropriate place, insert the following:

     SEC. ____. EMERGING AND FOUNDATIONAL NATIONAL SECURITY 
                   TECHNOLOGIES.

       (a) In General.--
       (1) In general.--Subpart E of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 is amended by 
     inserting after section 48C the following new section:

     ``SEC. 48D. CREDIT FOR NATIONAL SECURITY TECHNOLOGY.

       ``(a) General Rule.--For purposes of section 46, the 
     national security technology credit for any taxable year is 
     an amount equal to the applicable percentage of the basis of 
     qualified property placed in service by the taxpayer during 
     such taxable year.
       ``(b) Applicable Percentage.--For purposes of this section, 
     the applicable percentage with respect to any taxable year 
     is--
       ``(1) 30 percent in the case of qualified property placed 
     in service before January 1, 2028,
       ``(2) 20 percent in the case of qualified property placed 
     in service after December 31, 2027, and before January 1, 
     2029,
       ``(3) 10 percent in the case of qualified property placed 
     in service after December 31, 2028, and before January 1, 
     2031, and
       ``(4) zero in the case of qualified property placed in 
     service after December 31, 2030.
       ``(c) Qualified Property.--For purposes of this section--
       ``(1) In general.--The term `qualified property' means 
     property--
       ``(A) which is used in the United States,
       ``(B) substantially all of the use of which is to design or 
     manufacture qualified national security technology,
       ``(C) which is described in section 1221(a)(2), and
       ``(D) the original use of which commences with the 
     taxpayer.
       ``(2) Qualified national security technology.--The term 
     `qualified national security technology' means technology 
     which, as of the first year a credit under this section is 
     claimed by the taxpayer for the technology--
       ``(A) is described in section 721(a)(6)(A) of the Defense 
     Production Act of 1950 (50 U.S.C. 4565(a)(6)(A)), or
       ``(B) is included on the list promulgated by the White 
     House Office of Science and Technology Policy under 
     subsection (e).
       ``(d) Denial of Double Benefit.--A credit shall not be 
     allowed under this section for any expense for which a credit 
     is allowed under any other provision of this title.
       ``(e) Emerging and Foundational National Security 
     Technologies.--Not later than 6 months after the date of the 
     enactment of this section, the Secretary, in consultation 
     with the Director of the White House Office of Science and 
     Technology Policy, the Secretary of Defense, the Director of 
     National Intelligence, and the Secretary of Energy, shall 
     develop, promulgate, and update annually a list of emerging 
     and foundational technologies which are critical to national 
     security and the development and manufacture of which by 
     United States companies should be encouraged. Such list shall 
     be published annually and made publicly available, including 
     on the Internet.''.
       (b) Conforming Amendments.--
       (1) Section 46 of the Internal Revenue Code of 1986 is 
     amended--
       (A) by striking ``and'' at the end of paragraph (5),

[[Page S3138]]

       (B) by striking the period at the end of paragraph (6) and 
     inserting ``, and'', and
       (C) by adding at the end the following new paragraph:
       ``(7) the national security technology credit.''.
       (2) Section 49(a)(1)(C) of such Code is amended--
       (A) by striking ``and'' at the end of clause (iv),
       (B) by striking the period at the end of clause (v) and 
     inserting ``, and'', and
       (C) by adding at the end the following new clause:
       ``(vi) the basis of any qualified property taken into 
     account under section 48D(c).''.
       (3) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 of such Code is amended by 
     inserting after the item relating to section 48C the 
     following new item:

``Sec. 48D. Credit for national security technology.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the first 
     publication of the list required under section 48D(e) of the 
     Internal Revenue Code of 1986, as added by this Act.

     SEC. ____. EXCLUSION FOR GAIN FROM INVESTMENTS IN NATIONAL 
                   SECURITY TECHNOLOGY.

       (a) In General.--Part I of subchapter P of chapter 1 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new section:

     ``SEC. 1202A. EXCLUSION FOR GAIN FROM QUALIFIED NATIONAL 
                   SECURITY TECHNOLOGY STOCK.

       ``(a) Exclusion.--In the case of a taxpayer other than a 
     corporation, gross income shall not include any gain from the 
     sale or exchange of qualified national security technology 
     stock held for more than 5 years.
       ``(b) Qualified National Security Technology Stock.--For 
     purposes of this section--
       ``(1) In general.--Except as otherwise provided in this 
     section, the term `qualified national security technology 
     stock' means any stock in a C corporation which is originally 
     issued after the date of the enactment of the United States 
     Innovation and Competition Act if--
       ``(A) as of the date of issuance, such corporation is a 
     qualified corporation, and
       ``(B) except as provided in subsections (e) and (g), such 
     stock is acquired by the taxpayer at its original issue 
     (directly or through an underwriter)--
       ``(i) in exchange for money or other property (not 
     including stock), or
       ``(ii) as compensation for services provided to such 
     corporation (other than services performed as an underwriter 
     of such stock).
       ``(2) Active business requirement; etc.--Stock in a 
     corporation shall not be treated as qualified national 
     security technology stock unless, during substantially all of 
     the taxpayer's holding period for such stock, such 
     corporation meets the active business requirements of 
     subsection (d) and such corporation is a C corporation.
       ``(3) Certain purchases by corporation of its own stock.--
       ``(A) Redemptions from taxpayer or related person.--Stock 
     acquired by the taxpayer shall not be treated as qualified 
     national security technology stock if, at any time during the 
     4-year period beginning on the date 2 years before the 
     issuance of such stock, the corporation issuing such stock 
     purchased (directly or indirectly) any of its stock from the 
     taxpayer or from a person related (within the meaning of 
     section 267(b) or 707(b)) to the taxpayer.
       ``(B) Significant redemptions.--Stock issued by a 
     corporation shall not be treated as qualified national 
     security technology stock if, during the 2-year period 
     beginning on the date 1 year before the issuance of such 
     stock, such corporation made 1 or more purchases of its stock 
     with an aggregate value (as of the time of the respective 
     purchases) exceeding 5 percent of the aggregate value of all 
     of its stock as of the beginning of such 2-year period.
       ``(C) Treatment of certain transactions.--If any 
     transaction is treated under section 304(a) as a distribution 
     in redemption of the stock of any corporation, for purposes 
     of subparagraphs (A) and (B), such corporation shall be 
     treated as purchasing an amount of its stock equal to the 
     amount treated as such a distribution under section 304(a).
       ``(c) Qualified Corporation.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified corporation' means 
     any domestic corporation which is a C corporation if 
     substantially all of the activities of such corporation are 
     to design or manufacture qualified national security 
     technology (as defined in section 48D(c)(2)).
       ``(2) Aggregation rules.--
       ``(A) In general.--All corporations which are members of 
     the same parent-subsidiary controlled group shall be treated 
     as 1 corporation for purposes of this subsection.
       ``(B) Parent-subsidiary controlled group.--For purposes of 
     subparagraph (A), the term `parent-subsidiary controlled 
     group' means any controlled group of corporations as defined 
     in section 1563(a)(1), except that--
       ``(i) `more than 50 percent' shall be substituted for `at 
     least 80 percent' each place it appears in section 
     1563(a)(1), and
       ``(ii) section 1563(a)(4) shall not apply.
       ``(d) Active Business Requirement.--
       ``(1) In general.--For purposes of subsection (b)(2), the 
     requirements of this subsection are met by a corporation for 
     any period if during such period--
       ``(A) at least 80 percent (by value) of the assets of such 
     corporation are used by such corporation in the active 
     conduct of 1 or more qualified trades or businesses involving 
     the design or manufacture of qualified national security 
     technology (as defined in section 48D(c)(2)), and
       ``(B) such corporation is an eligible corporation.
       ``(2) Special rule for certain activities.--For purposes of 
     paragraph (1), if, in connection with any future qualified 
     trade or business, a corporation is engaged in--
       ``(A) start-up activities described in section 
     195(c)(1)(A),
       ``(B) activities resulting in the payment or incurring of 
     expenditures which may be treated as research and 
     experimental expenditures under section 174, or
       ``(C) activities with respect to in-house research expenses 
     described in section 41(b)(4),

     assets used in such activities shall be treated as used in 
     the active conduct of a qualified trade or business. Any 
     determination under this paragraph shall be made without 
     regard to whether a corporation has any gross income from 
     such activities at the time of the determination.
       ``(3) Qualified trade or business.--For purposes of this 
     subsection, the term `qualified trade or business' means any 
     trade or business other than any banking, insurance, 
     financing, leasing, investing, or similar business.
       ``(4) Eligible corporation.--For purposes of this 
     subsection, the term `eligible corporation' means any 
     domestic corporation.
       ``(5) Stock in other corporations.--
       ``(A) Look-thru in case of subsidiaries.--For purposes of 
     this subsection, stock and debt in any subsidiary corporation 
     shall be disregarded and the parent corporation shall be 
     deemed to own its ratable share of the subsidiary's assets, 
     and to conduct its ratable share of the subsidiary's 
     activities.
       ``(B) Portfolio stock or securities.--A corporation shall 
     be treated as failing to meet the requirements of paragraph 
     (1) for any period during which more than 10 percent of the 
     value of its assets (in excess of liabilities) consists of 
     stock or securities in other corporations which are not 
     subsidiaries of such corporation (other than assets described 
     in paragraph (6)).
       ``(C) Subsidiary.--For purposes of this paragraph, a 
     corporation shall be considered a subsidiary if the parent 
     owns more than 50 percent of the combined voting power of all 
     classes of stock entitled to vote, or more than 50 percent in 
     value of all outstanding stock, of such corporation.
       ``(6) Working capital.--For purposes of paragraph (1)(A), 
     any assets which--
       ``(A) are held as a part of the reasonably required working 
     capital needs of a qualified trade or business of the 
     corporation, or
       ``(B) are held for investment and are reasonably expected 
     to be used within 2 years to finance research and 
     experimentation in a qualified trade or business or increases 
     in working capital needs of a qualified trade or business,

     shall be treated as used in the active conduct of a qualified 
     trade or business. For periods after the corporation has been 
     in existence for at least 2 years, in no event may more than 
     50 percent of the assets of the corporation qualify as used 
     in the active conduct of a qualified trade or business by 
     reason of this paragraph.
       ``(7) Maximum real estate holdings.--A corporation shall 
     not be treated as meeting the requirements of paragraph (1) 
     for any period during which more than 10 percent of the total 
     value of its assets consists of real property which is not 
     used in the active conduct of a qualified trade or business. 
     For purposes of the preceding sentence, the ownership of, 
     dealing in, or renting of real property shall not be treated 
     as the active conduct of a qualified trade or business.
       ``(8) Computer software royalties.--For purposes of 
     paragraph (1), rights to computer software which produces 
     active business computer software royalties (within the 
     meaning of section 543(d)(1)) shall be treated as an asset 
     used in the active conduct of a trade or business.
       ``(e) Certain Rules Made Applicable.--Rules similar to the 
     rules of subsections (f), (g), (h), (i), and (j) of section 
     1202 shall apply for purposes of this section.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this section, including regulations to prevent the 
     avoidance of the purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for part I 
     of subchapter P of chapter 1 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new item:

``Sec. 1202A. Exclusion for gain from qualified national security 
              technology stock.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to stock acquired after the date of the enactment 
     of this Act.
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